Japan's most popular online networking site, Mixi Inc, said on Wednesday it plans to establish a subsidiary in Shanghai to tap China's fast-growing Internet market.

China's Internet population is increasing at a significant pace and its online advertisement market is also gathering steam, said Mixi spokeswoman Hirono Kobayashi.

Internet users in China reached 172 million in 2007 and the figure is expected to reach 200 million by 2010, making it the world's biggest Internet market by user numbers, she said.

Mixi has not yet determined exactly what service it will launch in China but it will likely be in Chinese, Kobayashi said.

Mixi.jp is Japan's second most visited Web site after Yahoo Japan's portal site. It has 13 million users, or around 10 percent of the population, and gets 11.8 billion page visits a month, Kobayashi said.

Still, Mixi might find it difficult to break into the Chinese social networking site (SNS) market, just as overseas companies have had trouble establishing a foothold in Japan.

Mizuho Securities analyst Yuichi Sato said the language barrier could prove to be a big hurdle.

Foreign SNS operators, such as Myspace.com and Korea's Cyworld ran by SK Telecom Co, have had difficulty succeeding in Japan. And just like those operators, it is going to be difficult to advance into the Chinese market from Japan.

China's SNS, including 51.com, Tudou.com and Rox.com.cn, already have a large local following.

Mixi.jp users can create an account for no cost through invitation of other users and can view user profiles or post blog entries, photos and video clips. The site can be accessed by computers or mobile phones.

The Tokyo-based company was founded in 1997 as an operator of a job search service, started Mixi.jp in 2004 and listed its shares in 2006.

Prior to the announcement, the stock fell 4 percent to 1.21 million yen, against a 3.2 percent fall in the TOPIX index of all first section shares.